US judge allows wiretap evidence in insider case

Federal prosecutors may use secretly recorded telephone conversations at trial against a second group of defendants in the high-profile Galleon hedge fund insider trading probe, a US judge ruled.

The ruling is another victory for prosecutors, who last month won permission from a different federal judge to use wiretap evidence against Galleon founder Raj Rajaratnam at his criminal trial. At a hearing on Wednesday, US District Judge Richard Sullivan also set a trial date of May 9 for the defendants in the second alleged trading ring. These defendants include Zvi Goffer, his brother Emanuel Goffer, Jason Goldfarb, Craig Drimal, Michael Kimmelman and Arthur Cutillo. The former traders and lawyers had pleaded not guilty to charges of conspiracy and securities fraud to trade on non-public information about technology companies and other companies. The men were arrested on November 5, 2009, three weeks after Rajaratnam. Their trial is expected to last seven weeks, according to lawyers who attended Wednesday's hearing. "The defendants have not made a persuasive argument," Sullivan said of the motion to throw out wiretaps in the long-running investigation. He reserved any decision on recorded conversations between Drimal and his wife. The case is part of what US prosecutors have described as the biggest probe of insider trading at hedge funds in the United States, stretching back at least three years. It has been ramped up in the last two months to include prosecutions of consultants accused of tipping off hedge funds about confidential information at companies such as Apple Computer, Marvell Technology Group Ltd and Advanced Micro Devices Inc. Rajaratnam has pleaded not guilty and his trial is scheduled to start on February 28 in the US district court in Manhattan. Of 24 defendants criminally or civilly charged in October and November 2009, 14 have pleaded guilty. Of these, 11 have cooperated with investigators and could be called to testify at trial. One defendant remains at large. Zvi Goffer's lawyer, Cynthia Monaco, told the judge that she was uncertain "all of the defendants will go to trial," but Goldfarb's lawyer appeared to rule out any more plea deals. "I have seen no indication of any of these cases being resolved before trial and the defendants are not involved in any negotiations as far as I know," Goldfarb's lawyer, Jeffrey Hoffman, said outside the courtroom. Zvi Goffer worked at Galleon and later started the Incremental Capital trading firm. Others associated with Incremental and the Schottenfeld Group LLC trading firm were Emanuel Goffer and Kimelman. Prosecutors said Drimal worked in Galleon's offices but was not employed there. Cutillo and Goldfarb worked at law firms before their arrests.